The relationship between the allocation of goods and a seller's revenue

Matthew O. Jackson, Ilan Kremer*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

We examine a seller auctioning off a set of objects to a large number of bidders, and restrict attention to auctions that are self-enforcing in that bidders do not want to walk away from the mechanism after they see the price that they must pay. We show that the seller's ability to extract the full possible revenue depends on whether the efficient allocation is concentrated among a few bidders or is dispersed so that a non-negligible fraction of bidders obtain objects. If it is concentrated then any sequence of mechanisms that achieve the efficient allocation (and there are many) asymptotically extracts the full surplus, and so it is in the seller's interest to efficiently allocate objects. In contrast, when the efficient allocation is dispersed then no sequence of mechanisms asymptotically extracts the full surplus. Moreover, in the dispersed case the seller may benefit by inefficiently bundling objects for sale.

Original languageAmerican English
Pages (from-to)371-392
Number of pages22
JournalJournal of Mathematical Economics
Volume40
Issue number3-4
DOIs
StatePublished - Jun 2004
Externally publishedYes

Bibliographical note

Funding Information:
We are grateful for financial support from the National Science Foundation under grants SES-9986190 and SES-0316493. We thank the participants in the NBER-NSF Decentralization Conference and the NATO Workshop on Allocation of Discrete Resources for helpful comments and feedback. We also thank Tom Palfrey and Jeroen Swinkels for helpful conversations, and John Nachbar for comments on an earlier draft. This paper was born from a splitting of a paper “On the Concentration of Allocations and Comparisons of Auctions in Large Economies.” The other part of that paper evolved into the paper “The Relevance of a Choice of Auction Format in a Competitive Environment.”

Keywords

  • Allocations
  • Asymptotic analysis
  • Mechanism design

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